Opinion
Argued March 3, 1955
Decided May 26, 1955
Appeal from the Supreme Court, Appellate Division, Second Department, STODDART, J.
Peter Campbell Brown, Corporation Counsel ( Stanley Buchsbaum, Morris L. Heath and Solomon Portnow of counsel), for appellants. Edward C. Raftery, Thomas Bress, Leopold Friedman, Milton C. Weisman, Cecelia H. Goetz, Mitchell Klupt, Edward S. Masket, Herbert B. Lazarus, Louis Weber and William Gold for respondents.
In 1954 the New York City Council adopted Local Law No. 37 imposing a tax of 5% upon admission charges to certain places of amusement. This meant that patrons of moving picture theatres are required to pay this tax when purchasing their tickets. The theatre is responsible for transmitting the tax money thus collected from the patron to the city. Five per cent computed upon admission prices of theatre tickets would often result in requiring theatregoers to pay fractions of a penny. The local law imposing this tax states that "Where the tax to be paid by a patron includes a fraction of one cent, the fraction shall not be paid when it is less than one-half cent or more". (Administrative Code of City of New York, § G46-2.0, subd. d.) Fractional parts of a cent thus disposable are colloquially known as "breakage".
The plaintiff theatres have brought this action for a declaratory judgment seeking a determination that the local law imposing this tax is void, and, more especially, for an adjudication that the portion of this local law is void which directs the collection of an entire additional cent tax in instances where only half or a major fraction of a cent is due. Mathematically considered, the result in certain instances is to require payment of more than a 5% admissions tax.
The enabling act does limit the amount of the tax which may be charged by the municipality to 5%. It does state that taxes "not in excess of five per cent on admissions" may be charged by the city "to be collected and administered in such manner as may be provided by any such local law" (L. 1947, ch. 278, amd. by L. 1948, ch. 651; L. 1949, ch. 806; L. 1950, chs. 589, 590; L. 1951, ch. 602; L. 1952, chs. 742, 789; L. 1953, ch. 547, and L. 1955, ch. 93). This is the same enabling act which authorizes counties or cities to charge retail sales taxes, business use taxes, vending machine taxes, consumers' public utility taxes and other forms of local taxation. Section 7 (now § 10 thereof) provides that "The state tax commission shall prepare model local laws, ordinances, resolutions and regulations for the assistance of local officials and shall otherwise advise and cooperate with them for the purpose of effectuating uniform administration and distribution of such taxes." Pursuant to this authority, the State Tax Commission has prepared model forms which dispose of breakage in similar manner to the present in case of the retail sales tax (2 Commerce Clearing House State Tax Reporter [N.Y.], § 73-175, alternate reg. 14) and the consumers' utility tax (2 Commerce Clearing House Tax Reporter [N.Y.], § 73-450, sec. 3, § 73-460). These procedures, essentially the same as in the case of the New York City admissions tax, have been followed by municipalities throughout the State, which are hereafter enumerated.
The dissenting Justices at the Appellate Division considered that the manner of handling breakage prescribed by this local law of New York City should be sustained under the doctrine of de minimis non curat lex. The splitting of a penny was regarded as too inconsequential to put the court in motion. Special Term concluded that the enabling act authorizing a tax of 5% should be read in the light of the custom of the business community to add one whole cent wherever the correct amount calls for a half or major fraction of a cent. The majority at the Appellate Division were impressed by the fact that the amount of municipal revenue at stake in this method of handling breakage is substantial, and that the breakage constitutes more than a minimal proportion of the total admissions tax. For these reasons, the Appellate Division held that the doctrine of de minimis does not apply.
The burden of paying the admissions tax, as has been stated. falls upon the patron of the theatre. We think that in deciding whether to apply the doctrine of de minimis non curat lex, the problem should be studied from the viewpoint of the purchaser of a theatre ticket. When he buys his ticket, he is not likely to consider whether the extra payment will range from 5% to 9% of the admission tax imposed upon his ticket, but in his eyes it is simply the payment of one additional penny due to the circumstance that the currency of the country does not admit of paying less than that amount. Coins representing mills are no longer produced by the United States mint. The abstract justice of paying the exact amount due in monetary transactions has been thought by the Congress to be outweighed in importance by the inconvenience of coins of such infinitesimal value. Consequently the custom has arisen of paying an extra cent if the amount mathematically payable would be one half of one cent or more, and of disregarding the extra cent where the computation comes to less than half a cent.
If plaintiffs be correct in their computation that the city has at stake about $1,600,000 (although this figure allows for no offset by reason of instances where the fraction of the extra cent is less than half a cent and consequently is disregarded), this amount would be substantial to the city, nor is the fraction of the admissions tax negligible that is represented by breakage, yet practically speaking the breakage is inconsequential in amount to the patron when he buys his ticket. From the viewpoint of the person who pays this tax, the breakage is de minimis. The reason for charging the extra cent would be manifest to any theatregoer if brought to his attention, for it fits into his habit in other departments of life.
Nor is the established administrative procedure in levying and collecting taxes of all of the varieties mentioned to be disregarded as a practical construction of this statute. We are authoritatively informed that a practice respecting breakage similar to that in use in collecting the admissions tax in New York City has been followed in Binghamton and Elmira, and that five cities in the State have enacted sales taxes pursuant to the same enabling act which dispose of breakage in the same manner (Local Laws, 1954, No. 2 of City of Auburn, § 3; Local Laws, 1950, No. 1 of City of Newburgh, § 3, p. 219 [now expired]; Local Laws, 1951, No. 1 of City of Niagara Falls, § 3, p. 318; Local Laws, 1949, No. 2 of City of Poughkeepsie, § 3 [published in Local Laws, 1950, p. 432]; Local Laws, 1947, No. 17 of City of Syracuse, § 3, p. 423). Erie and Monroe Counties have followed the same procedure in their sales taxes adopted in 1947 and in 1952 (2 Prentice Hall New York Tax Service, §§ 68,308, 68,956), which is likewise true where a consumers' utility tax has been adopted. This method of dealing with breakage, it has been previously stated, has been prescribed by the State Tax Commission.
If plaintiffs be correct in their contention, no municipality could establish a theatre admissions tax at more than approximately 4 1/2%, instead of the 5% maximum specified by the enabling act, inasmuch as otherwise situations would occur where the breakage would cause the tax upon the price of a ticket to run over 5%. When the Legislature authorized municipalities to levy these taxes at 5%, we think that it meant 5% subject to the manner of handling breakage which is usual in commercial transactions. We think that to be the way in which the enabling act would be interpreted in the ordinary thought of men. That the Legislature so intended is indicated by the circumstance that the enabling act was amended in other respects after the practice had become general of handling breakage in this manner. If that practice had been considered to have been contrary to the original legislative mandate, the Legislature might well have said so while making amendments such as by L. 1950, ch. 590; L. 1951, chs. 602, 811; L. 1952, chs. 742, 789; L. 1953, ch. 547. If the practical construction of a statute is well known, the Legislature is charged with knowledge and its failure to interfere indicates acquiescence therein ( People v. Charbineau, 115 N.Y. 433). It was not until chapter 93 of the Laws of 1955 that anything was enacted upon this point, and then the Legislature did not disavow but confirmed this interpretation. It is so natural an interpretation that it should not be held to weaken or to violate the rule of strict construction in favor of the taxpayer.
Although there appear to be no New York decisions, courts of other States have almost uniformly reached the same result where they have had occasion to decide this question ( Wilson v. Philadelphia, 330 Pa. 350; F.W. Woolworth Co. v. Gray, 77 N.D. 757; Mouledoux v. Maestri, 197 La. 525; Smoky Mountain Canteen Co. v. Kizer, 193 Tenn. 598; Jensen Candy Co. v. State Tax Comm., 90 Utah 359). A possibly contrary decision is Fischer's Pool Swimming Club v. Towamencin Twp. (69 Montgomery Co. Law Rep. 389, 87 Penn. D. C. 157) but the judgment in that case was not reviewed upon appeal, and the decision appears not to be entirely consistent with Wilson v. Philadelphia ( supra), where the situation was treated as de minimis.
Plaintiffs' argument is without substance that section B32-5.0 of the Administrative Code precludes any municipal admissions tax. This section makes it a misdemeanor for a theatre to exact from a patron "any greater amount than such regular or established price or charge [the amount printed on the ticket for the cost of admission] plus the amount of any tax imposed by the Government of the United States". This section could not have been designed to prevent the imposition of an otherwise proper tax. It simply meant that the theatre could charge no more than the price of the ticket plus admissions taxes, and the reason on account of which the Federal tax is mentioned appears to have been that it was the only tax then imposed upon the purchase of admission tickets. The enactment of this section of the Administrative Code could not and did not prevent the future imposition of taxes by either the State or the city pursuant to an enabling act. The reasonable interpretation of section B32-5.0 is that it prevents charging more for a ticket than the regular or established price, but that it does not prohibit the levying or collection of taxes which may validly be levied upon admissions pursuant to law.
Having arrived at this conclusion, it is not necessary to depend upon the effect of chapter 93 of the Laws of 1955. That act purports to construe the 1947 enabling act and its amendments in the same manner in which it has been construed in this opinion, and to impose retroactively over a period of nine months the same admissions taxes which it is now being held were legally imposed in the beginning. Without disturbing the rule that one session of the Legislature cannot bind later sessions, or the principle that retroactive taxation is generally unconstitutional, we have held that a statute adopted by a subsequent Legislature may be regarded to some extent in resolving ambiguity in a prior enactment ( Matter of Chatlos v. McGoldrick, 302 N.Y. 380, 388), and limited retroactivity has been upheld in the case of certain taxes ( Matter of Lacidem Realty Corp. v. Graves, 288 N.Y. 354). In any event, the act of 1955 bearing upon the subject of this litigation confirms the views expressed herein. An analysis of its constitutionality in this context would therefore be superfluous.
The order of the Appellate Division should be reversed, and the order and judgment of Special Term, Queens County, reinstated, with costs to appellants in this court and in the Appellate Division. The question certified "Was the order of the Appellate Division properly made?" is answered in the negative.
CONWAY, Ch. J., DESMOND, DYE, FULD and FROESSEL, JJ., concur; BURKE, J., taking no part.
Ordered accordingly.